Negotiable Certificate Of Deposit (NCD)
Candlefocus EditorUnlike regular CDs, negotiable CDs can be actively traded in secondary markets. This is one of the benefits of owning NCDs, as it can provide investors with greater liquidity than that of a traditional CD. In addition, NCDs usually carry a lower interest rate compared to other investments, averaging around 1-2%, due to the reduced credit risk they carry. Furthermore, similar to U. S. Treasury bills, NCDs are considered a low-risk, low-interest security. This makes them a great option for those who want a safe, low-risk investment.
While NCDs provide many benefits, there are also some drawbacks to consider. For instance, NCDs are typically considered illiquid since the secondary markets for NCDs are not as robust or active as those for other securities. Additionally, NCDs are subject to early redemption penalties, meaning that investors are not able to redeem their NCDs prior to maturity without incurring a penalty.
In conclusion, negotiable certificates of deposit are a great way for investors to access the secondary market while still enjoying the advantages of a low-risk, low-interest security. While NCDs may not provide the same liquidity as traditional CD investments, they can still be beneficial for investors looking for secure, low-risk investments with a high return.